Marketing and Segmentation

Suppose a teenage girl is looking for a pair of jeans. What influences her?

Demographics Psychographics Perceptual clues Symbolism Past experience Group dynamics Rituals Family Reference groups Race & ethnic factors Social class Subculture Culture

Market Segmentation

“Smart marketing starts with smart segmentation.” Jeffrey J. Fox

Target Market: A group of people or organizations which a business creates and maintains a marketing mix specifically designed to satisfy the needs of group members Market Segment: Individuals, groups, or organizations with one or more similar characteristics that cause them to have similar product needs Market Segmentation: The process of dividing a total market into groups with relatively similar product needs to design a marketing mix that matches those needs

Marketing Concept: “All marketing strategies should be based on known customer needs and or wants.” Segmentation is the practical application of marketing research and consumer behavior.

Reminder: The “marketing mix” consists of: Product Price Promotion Distribution (Place)

Almost no one tries to sell to everyone!

Major kinds of segmentation: Undifferentiated marketing strategy: Generic Differentiation Same marketing mix for ALL segments Overlooks segment differences 4-Ps designed for everyone Advantage: Concentrated resources

Major kinds of segmentation: Undifferentiated marketing strategy: Generic Differentiation Same marketing mix for ALL segments Overlooks segment differences 4-Ps designed for everyone Disadvantage: 4-Ps for everyone? Competing against focused firms

Concentrated Undifferentiated

2. Full-coverage marketing strategy: Segmented Differentiation Treat each segment as separate market 4-Ps designed for every market Advantage: Focus…

2. Full-coverage marketing strategy: Segmented Differentiation Treat each segment as separate market 4-Ps designed for every market Disadvantage: Development costs (must weigh increased costs increased sale)

Concentrated Undifferentiated

3. Single Marketing Strategy: Targeted Differentiation Niche Marketing Go after one segment (ethnic marketing) Advantage: Sharp focus… good expertise efficiency… high profits gives smaller firms a chance good place to start

3. Single Marketing Strategy: Targeted Differentiation Niche Marketing Go after one segment (ethnic marketing) Disadvantage: More risk… eggs in one basket Competition can wipe you out

4. Concentrated marketing strategy: Hybrid Differentiation Single product to several segment 5. Micromarketing Local marketing and individual marketing Mass Customization Build-to-Order (BTO)

Concentrated Undifferentiated

Which is this? 8-21

To work, segments must have: 1. Substantiality Must be large enough enough money, customers, etc enough room to grow

Basic marketing rule: The best product, best prices, and best business in the world will fail if there are no customers!

Basic marketing rule: The best product, best prices, and best business in the world will fail if there are no customers!

To work, segments must have: 2. Identifiablity Must be able to identify segment and measure it

To work, segments must have: 3. Reachability Must be accessible must be actionable (can action be taken?)

The Segmentation Tradeoff: Synergies vs. Cannibalization Organizational Synergy Increased customer value through efficient marketing and manufacturing Cannibalization “Tiffany/Walmart” Strategies two-tier products 8-27

The five key steps in segmenting and targeting markets that link market needs to a firm’s marketing program 8-28

Segments should be based on what people VALUE! Ryan Hamilton

Five Steps in Market Segmentation

Criteria to Use in Forming the Segments Step 1. Criteria to Use in Forming the Segments Simplicity and Cost-Effectiveness of assigning potential buyers to Segments 8-32

Criteria to Use in Forming the Segments Step 1. Criteria to Use in Forming the Segments Simplicity and Cost-Effectiveness of assigning potential buyers to Segments Potential for increased Profit 8-33

Criteria to Use in Forming the Segments Step 1. Criteria to Use in Forming the Segments Simplicity and Cost-Effectiveness of assigning potential buyers to Segments Potential for increased Profit Similarity of needs of potential buyers within a Segment 8-34

Criteria to Use in Forming the Segments Step 1. Criteria to Use in Forming the Segments Simplicity and Cost-Effectiveness of assigning potential buyers to Segments Potential for increased Profit Similarity of needs of potential buyers within a Segment Difference of needs of buyers among Segments 8-35

Criteria to Use in Forming the Segments Step 1. Criteria to Use in Forming the Segments Simplicity and Cost-Effectiveness of assigning potential buyers to Segments Potential for increased Profit Similarity of needs of potential buyers within a Segment Difference of needs of buyers among Segments Potential of a marketing action to reach a Segment 8-36

Step 1. Common Segments Geographical Climate Region City size Population density 8-37

Market Segmentation Geographic

Market Segmentation Geographic Demographic

Age (Generational marketing) Step 1. Common Segments Demographics Age (Generational marketing) Gender (?) Marital status Income Education Occupation Racial and Ethnic 8-43

Market Segmentation Geographic Demographic Psychographic

Step 1. Common Segments Psychographics Perception Gender (?) Motivation Personality Attitudes https://www.youtube.com/watch?v=DV6X7POhdoo http://www.expedia.com/Waterloo-Hotels-Baymont-Inn-Suites-Waterloo.h17890.Hotel-Information?chkin=10%2F29%2F2013&chkout=10%2F30%2F2013&rm1=a2&hwrqCacheKey=3ac1ed16-2067-4bf3-b2a0-8b521c84be7aHWRQ1381949822543&c=30126d42-02ed-4261-9ade-64b0ef193af1& 8-45

Market Segmentation Geographic Demographic Psychographic

The Nine Nations

Montana economic development? From east to west Or From north to south

Step 1. Common Segments Lifestyle Combination of: Place Person Products VALs 8-49

Place Person Products

Step 1. Common Segments Usage Use-related usage rate brand loyalty awareness Use-situation where… when… why… with whom http://www.youtube.com/watch?v=vbsyEI78m5s 8-53

Usage rates (frequency) 80/20 rule Long tail Step 1. Common Segments Behavioral Product features Usage rates (frequency) 80/20 rule Long tail Selling small amounts to few customers, BUT have lots of things to sell (Netflix) 8-54

Culture and subculture Social class Religion Step 1. Common Segments Socio-cultural Culture and subculture Social class Religion https://www.youtube.com/watch?v=ouZLD2vfD6Q 8-56

Subculture

Social class may be hard to define, but we all know it when we see it.

Segmentation bases, variables, and breakdowns for U. S Segmentation bases, variables, and breakdowns for U.S. consumer markets 8-63

The five key steps in segmenting and targeting markets that link market needs to a firm’s marketing program 8-64

Target Marketing Step 2: The process of evaluating each market segment’s attractiveness and selecting one or more segments to enter.

Marketing positioning Arranging for a product to occupy a clear, distinctive , and desirable place relative to competing products in the minds of target consumers.

Product positioning: is the place an offering occupies in a consumer’s mind on important attributes relative to competitive products. 8-68

Product differentiation: is a marketing strategy that involves a firm using different marketing mix activities to help consumers perceive the product as being different and better than competing products. 8-69

8-70

Prince Sports targets racquets at specific market segments 8-71

Step 3 Market-product grids show alternative strategies for a lawnmower manufacturer 8-72

The five key steps in segmenting and targeting markets that link market needs to a firm’s marketing program 8-73

STEP 4: SELECT TARGET MARKETS Criteria to Use in Selecting Target Markets Two Types of Criteria Those that divide a market into Segments Those that actually pick the Target Segments 8-74

Criteria to Use in Selecting Target Markets Market Size Expected Growth Competitive Position Cost of reaching the Segment Compatibility with organizational objectives and resources 8-75

Perceptual Map Example A Perceptual Map to reposition chocolate milk for adults: Identify Important Attributes for Adult Drinks Discover How Adults See Competing Drinks Discover How Customers See Chocolate Milk Reposition Chocolate Milk to Make It More Appealing to Adults 8-76

A perceptual map: is a means of displaying or graphing in two dimensions the location of products or brands in the minds of consumers to enable a manager to see how consumers perceive competing products or brands, as well as the firm’s own product or brand. 8-77

A perceptual map of the location of beverages in the minds of American adults 8-78

The strategy American dairies are using to reposition chocolate milk to reach adults 8-79

Step 5 Do it!